Nunn: Budget lukewarm on climate change measures

Rishi Sunak’s first Budget failed to prioritise climate change with only limited tax breaks to invest in zero emission cars as coronavirus swept other global issues aside. Yvette Nunn, director of Berkeley Associates on a lost opportunity

Whilst zero emission cars did get a mention in the budget with the Chancellor, the Rt Honourable Rishi Sunak, announcing that there would be ‘cheaper electric vehicles’, more needs to be done to incentivise drivers to switch to electric cars, or a hybrid at least, as, in fact little was done in the budget to encourage drivers to switch.

Those who are either put off by the limited range of most electric cars, or the high cost of those cars which promise more miles which stand a better chance of getting you home on a single charge, are no better off, as the budget only removed the Vehicle Excise Duty for charged cars costing more than £40,000, the ‘VED expensive car’ supplement.

The car industry is suffering from announcements to ban the sale of cars powered solely by fossil fuel, as many who would have changed or be thinking of changing their car, are being put off buying a new car, because they just don’t know what to buy.

Many would turn to electric in some form or another, but are completely put off by the poor range, poor charging facilities and the upfront cost.

It was surprising that cars powered by electric alone were ever liable for the higher Vehicle Excise Duty.

Electric cars might be exempt from the first tax payment on registrations, and the annual ongoing charge, but not the charge that applied to cars with a list price before discount of more than £40,000.

However, removing this ‘penalty’ for buying an electric car is only a tiny step towards encouraging car buyers to go green, the upfront cost of buying an electric, or a hybrid car, still means someone walking into a car showroom will look the other way, as many cars powered by fossil fuel alone are cheaper than their electric or hybrid equivalent counterpart.

There remains a high penalty for buying electric. As an example, the British marque famous for its ‘big cat’ logo, sells three SUV models, the one powered by conventional fuels starts at a little over £36,000, but the starting price of the electric equivalent has a starting price in excess of £63,000.

Anyone in the market to buy one of these models will need very deep pockets indeed to drive away from the showroom both silently and emission free

Businesses have little cause to switch too. The reduced Class 1A NIC on the lower Benefit in Kind will not be much of an incentive, nor compensate for the higher price of providing an electric or hybrid company car.

While employers might benefit from the 100% writing down allowance for a (new) purely electric car, those looking to protect the needs of the business and opt for a hybrid for greater flexibility will not, as few hybrids hit the right ‘tax’ button given the limited range of hybrids on a single charge is so limited, just as a pre-owned car will not qualify for the enhanced allowances either.

I would like to see the penalty which denies the employer from claiming the 100% allowance on a second-hand electric car removed, as well as a reducing the VAT. Maybe the increased research and development reliefs announced in the budget will encourage the industry to spend more on improving the range of hybrid cars, and reduce the upfront cost. We can but hope.

About the author

Yvette Nunn CTA (Fellow) ATT (Fellow) MAAT is director of Berkeley Associates

 

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